Hi. I have recently married (april 2010) and live in my wifes…

Hi.

You won't necessarily sell your house free from CGT in 3 to 5 years time. Whether that happens or not will depend on the total period of ownership, the period you lived in the property, the period it was let, what you paid for it and what you sell it for. If you sell it within three years of moving out, the entire gain will be exempt from CGT.

If you keep your house beyond January 2012, the gain for the period you lived in the property will be exempt from CGT as will the gain for the last 36 months of ownership after you have moved out. In addition to that, you will be entitled to letting relief which will reduce the gain not covered by the reliefs I just mentioned by the lesser of:

1 £40,000,

2 the gain for the period that you lived in the house plus the last 36 months of ownership and

3 the gain for the period it was let less any part of the letting period that coincides with the last 36 months of ownership.

If there was anything left after deducting letting relief, you would deduct the annual CGT exemption and the balance would be subject to CGT at the prevailing rate or rates.

As you only moved out of your house in January 2009 you have until January 2012 to sell it and be guaranteed not to have a CGT liability.

While a property is let, by definition it cannot be your main residence so you couldn't elect for the house in your name to be treated as your main home. Furthermore, your wife has never lived there.

You would need to do some calculations to assess the pros and cons of putting either of the properties into joint names before you actually did so. If you did, the gain would be split 50:50 and the gain for the spouse who had never lived in that property or had done so for only a short time would be taxable on a proportion of the gain that would be exempt (covered by the main residence exemption) had the property stayed in the other spouse's name. However, it would allow you to have two CGT exemptions and two lots of letting relief which could be worth up to £40,000 each which might outweigh the loss of the main residence exemption on half the gain.

Nobody knows what the CGT rules on property will be in two years let alone another twenty years. If you let your wife's house for the long term, that would expose an increasing proportion of an eventual gain on its sale to CGT even allowing for the main residence exemption, the last 36 months exemption and two lots of letting relief. That's assuming these reliefs will still exist in 20 years.

Let me know if you have any queries.